Has the Amplitude of Business Cycles Deepened in the Post-World War II Era? A Variance Analysis of Thirty-Five Countries

Abstract

According to Karl Marx, business cycles in capitalist economies should increase in amplitude over time. In this hypothesis, income and wealth inequality should increase within a capitalist system, resulting in increased economic instability. Thanks to Keynesian policy recommendations, governments and central banks have discovered policy options for correcting downturns in the economy. However, if Marx is correct, policy makers will face business cycle movements ever-increasing in severity. In this article, we review Marx’s hypothesis in the literature. Further, we briefly look at recent (post-war) data to see if empirical evidence supports Marx’s original claim.